Steamboat Springs Mortgage rates are steadily rising after several months spent at the lowest percentages in years.
The mortgage rates during the final months of 2003 were the lowest in 45 years, said Lynn Reiff of Wells Fargo Home Mortgage.
Over the past four to five weeks, however, the rate of a 30-year, fixed-rate mortgage increased almost a full percentage point. Local lenders reported signing rates at 5 percent a month ago, while rates jumped to almost 5.9 percent this week.
Last week marked the sharpest increase in 30-year, fixed rate mortgages, which rose to an average of 5.89 percent, up from 5.79 percent, according to a nationwide survey by corporate mortgage company Freddie Mac.
On a $200,000 home loan, that change would increase monthly payments from $1,074 to $1,185.
The rates dropped back Thursday, however, to about 5.75 percent. The spike in the market was largely because of comments this week from Federal Reserve Chairman Alan Greenspan, local mortgage brokers said.
Greenspan essentially predicted that mortgage rates would go up as the economy continues to improve.
"When Greenspan speaks, the market goes crazy," said Heather Kline of Moen Mortgage in Stagecoach. "Nobody's blind to the fact that rates are going up, but so many events play into it: terrorism, corporate decisions. It's not just the standards of unemployment and housing rates anymore.
"This hasn't been your normal recession. People tend to pay more attention to the experts in times like this."
Reiff said Greenspan usually just confirms what market watchers already see coming.
"Normally, rates go up before Greenspan talks," she said. "It is people reacting to what they think he will say."
Mortgage broker Peter Smith, of First Western Mortgage in Steamboat Springs, agreed many people who keep track of mortgage rates saw the increase coming.
Recent economic reports indicating increased job creation, retail sales and consumer prices have verified feelings that the Federal Reserve Board would raise interest rates, he said.
"One of the reasons you've seen (mortgage rates) fall as low as they have is threat of deflation," Smith said. "Positive buying and increased employment shows the economy is getting stronger, so now there is inflation is what worry about," Smith said. "The Fed lowers rates to combat deflation and it raises rates to combat inflation."
Smith said potential homebuyers often ask him about finding the right time to buy. Watching economic news helps, but ultimately it is a guessing game, he said.
"If they want to know what rates will be, they can watch the news and base their decision on their gut feeling of the economy's status," Smith said. "If they expect the economy to be slow, I suggest they wait until then."
Even at 5.75 percent, mortgage rates are historically low. In the 1990s, rates were as high as 9 percent, Reiff said. In the 1980s, they were even higher. She said she once was offered a 10 percent adjustable-rate mortgage as a job benefit in the 1980s, when adjustable rates were as high as 12 and 14 percent.
Adjustable-rate mortgages now are available in the 3 percent to 4 percent range, though they are more susceptible to market changes than longer fixed-rate mortgages, Kline said.
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